Alibaba Group Holding Ltd is no longer the stock market darling , as its stock is in steep decline. When the stock debuted, Alibaba Group saw a furry of investors buying their stock, but there is a significant difference between then and now. The decrease in the stocks is due to the colossal outflow of money from the Chinese stock markets.
The prospects for a stock recovery in this matter do not look great. Previously, the group had placed a lock-up on their stocks to prevent from the price from decreasing, but with that expiring on Sunday; their prices have continued to decline.
What is a Lock-Up?
The lock-up prevented insiders from selling their shares for up to a year, but with the restriction gone, the selling has been in full swing. Alibaba Group took the risk of taking the the company public. When a company does this, they put restrictions on the shares held by insiders and shareholders to block extra downward demands during trading.
For the Alibaba Group, this couldn’t have come at a worse time, as they are already swimming in deep waters as it is. Their stock is already under immense pressure, which means shareholders and employees will be quick to get rid of it to lock in profits vested to them, and that is not good news for the company. Once the restriction expires, companies are exposed to uncertainty, especially when the chances of the stock succeeding are not looking good. This is exactly the circumstances for the Alibaba Group presently.
Examining Alibaba Group’s Stock
Since the initial public offering (IPO), the company’s shares decreased more than 30 percent. The downward spiral began earlier this year, but the worst blow to its market value was yet to come. Currently, the stock trades decreased below the company’s IPO value of $68. When the lock-up expired, the shares decreased by almost 3 percent during the first day of the trading week.
Now, the company’s shares stand at $63.90. Investors have tied themselves in knots with worry about the impending lows the Alibaba Group will face soon, as at the rate it’s declining, these declines will continue to mount.. The company has a 52 week low of $58 and a 52 week high of $120. Another threat faced by the company to their stocks is the outflow of money in large volumes. The S&P index has gone down more than 2 percent since Alibaba Group made their stock available to the public to buy.
The Cause for the Decline
Traders and investors have not taken well to the discovery of counterfeit and fake goods in the online marketplaces of Alibaba. Although the company has tried to eliminate counterfeit and fake good, the damage to its market value has already been done. Another threat pulling their stock price down is the obstacles they face back home in China. With China’s economy on a decline, the company’s market value has taken a hit, as sales have decreased.
The majority of financial analysts, 43 out of 51, have advised to Buy, six have said to Hold, and two have said to Sell.